Earnings call transcript: Norsk Titanium Q2 2025 shows revenue growth, stock dips

Norsk Titanium reported a 54% year-over-year increase in revenue for the second quarter of 2025, reaching $2 million. Despite this growth, the company’s stock fell by 7.86%, closing at $1.39, reflecting investor concerns over increased losses and reduced cash holdings. According to InvestingPro data, the company’s overall financial health score is rated as "WEAK," with particularly concerning metrics in profitability and growth. The stock has declined over 81% in the past year, significantly underperforming the market. The company also revised its future revenue targets, pushing a previously set goal from 2026 to 2028.

Key Takeaways

• Norsk Titanium reported a 54% increase in revenue to $2 million.
• The company’s EBITDA loss widened to $15 million.
• Stock price fell 7.86% following the earnings release.
• Cash holdings decreased to $12 million, with a monthly burn rate of $2.9 million.
• The company revised its $150 million revenue target to 2028.

Company Performance

Norsk Titanium’s performance in Q2 2025 reflects significant revenue growth, yet the company continues to face challenges with its bottom line. The EBITDA loss increased to $15 million from $12 million in the previous period, highlighting ongoing financial pressures. InvestingPro analysis reveals concerning gross profit margins of -4,198% and a return on assets of -205%, suggesting significant operational challenges. Despite these challenges, Norsk Titanium maintains its position as the only qualified supplier of structural additive titanium parts in the commercial aerospace sector, leveraging its first-mover advantage. Subscribers to InvestingPro can access 12 additional key insights about the company’s financial health and market position.

Financial Highlights

• Revenue: $2 million, a 54% increase from $1.3 million YoY.
• EBITDA Loss: $15 million, up from $12 million.
• Operating Expenses: Approximately $17 million.
• Cash Holdings: Reduced to $12 million from $23 million.
• Net Comprehensive Loss: $14.5 million.

Outlook & Guidance

Norsk Titanium revised its 2026 revenue target to $70 million, with two-thirds of projected sales already covered by firm contracts. The company pushed its $150 million revenue target to 2028. Cash flow breakeven is now anticipated in early 2027, and a $15 million equity raise is planned for Q3 2025. These adjustments reflect a strategic recalibration in response to market conditions and operational challenges. Based on InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at current levels. For deeper insights into the company’s valuation and comprehensive financial analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Karl Johnson emphasized the company’s market potential, stating, "Our market opportunity remains intact. Revenues have been delayed but not lost." CFO Asher Asheri highlighted the financial strategy, noting, "We’re planning to raise $15 million in new equity in the third quarter." Johnson also underscored Norsk Titanium’s competitive edge, saying, "We have a competitive first mover advantage."

Risks and Challenges

• Increased Losses: The widening EBITDA loss could strain financial resources.
• Cash Burn Rate: The high monthly burn rate may necessitate additional funding.
• Market Volatility: Fluctuations in titanium prices could impact cost structures.
• Revenue Diversification: Dependence on aerospace could pose risks if sector demand fluctuates.

Norsk Titanium’s Q2 earnings call highlighted both achievements in revenue growth and challenges in financial sustainability. The company’s strategic adjustments and market position will be crucial as it navigates the evolving aerospace and defense landscape.

Full transcript - Norsk Titanium AS (NTI) Q2 2025:

Karl Johnson, CEO or President, NORSP Titanium: Good morning, and welcome to NORSP Titanium’s presentation for the first half twenty twenty five results. My name is Carl Johnson, and with me is NORSP’s CFO, Asher Asheri. Moving straight into the numbers, we report revenue of $2,000,000 for the first half, up from $1,300,000 in the same period last year, a year over year increase of 54%. This is lower than we had anticipated and primarily reflects continued delays in part transitions in aerospace. As you can see from the table, the number of parts in serial production remained unchanged at 54 and now stands at 56 following contracts for two new parts with the U.

S. Department of Energy contractor. The plateau in number of parts in serial production doesn’t mean that we aren’t engaging with our customers. Our engagement with Airbus remained high in the first half with continued deliveries of parts under contract and qualification of additional machines for expanded production. Also, about a third larger production contract in which we anticipate in the second half of the year.

Two more machines have been qualified, and we are ready to expand production. Operationally, we are also progressing in our efforts to capture diversify our customer base. We have significantly strengthened our commercial organization under leadership of Boyd Adams with a stable with a sales team of over a hundred years experience in aerospace, defense and industrial markets. We’re also developing an external network of sales reps to broaden the reach into industrial markets. We have continued to strengthen our supply chain by adding new suppliers and securing raw material.

We have expanded our operational capabilities with in house machining and quality testing equipment to speed up part development. And we have increased production efficiency by designing workstations enabling one operator to handle multiple machines. I am proud to see us becoming the first ever additive manufacturing company to prepare material specs for the standardization under MMPDS, which will unlock broader applications and accelerate adoption in new markets. Summing up, we are working to accelerate parts transition, increase manufacturing capacity and readiness and expand to other markets. With that, I’ll leave the floor to Asher, who will take you through the financials for the first half.

Asher Asheri, CFO, NORSP Titanium: Thank you, Karl. Good morning and thank you for joining us this morning. As Karl said, we had $2,000,000,000 in revenue with operating expenses of approximately $17,000,000 We report an EBITDA loss of $15,000,000 in the 2025. This compares to the EBITDA loss of approximately $12,000,000 in the same period last year. The H1 twenty twenty five OpEx increase reflects investments in our sales expansion sales force expansion, industrial engineering capabilities and our supply chain readiness for the orders growth.

Net financial expenses amounted to $24,200,000 This is an unrealized foreign exchange loss on an intercompany loan between the Norwegian parent and the U. S. Subsidiary. However, the impact of this unrealized expense is reversed in the comprehensive income for a net total comprehensive loss of $14,500,000 Turning our attention to cash flow. We have had an increase in our monthly cash burn rate to 2,900,000 This reflects an increase in commercial and operational activity as we drive customer engagement.

This cash burn rate was offset by a $5,000,000 drawdown on the term loan facility that we entered into earlier this summer. That net effect was $4,700,000 We also realized a foreign exchange gain of approximately $1,700,000 Overall, this means our cash holding was reduced from approximately $23,000,000 to $12,000,000 during the first half of this year. With delayed revenue ramp up, the current cash burn rate and this development in the cash position, it is obvious that we need to revise our business plan going forward. I’ll hand the mic back to Karl to talk you through these revisions. Karl?

Karl Johnson, CEO or President, NORSP Titanium: Thank you, Asher. Before we discuss our commercial outlook in more detail, let’s take a look at the foundation for our value proposition. We have set out to transform metal manufacturing with our RPD technology. We we offer an efficient manufacturing process with shorter lead times, less financial less final machining and less cost. Our process is clean with less waste and less energy consumption.

It is better for the environment. We’re the only qualified supplier of structural additive titanium parts in commercial aerospace and have a significant first mover advantage. And we have machines in place to scale production. As we have shown you before, we’ve spent more than a decade establishing material specifications and qualifying our technology, our processes and our machines for serial production with the toughest and most quality conscious customers in the world, the aerospace and defense markets. All prospective competitors need to go through this same process, and I am sure that we have created a significant competitive advantage.

We are now in the execution phase where we are seeing seeking to move more critical parts into serial production. We we need to acknowledge that this has taken this process is taking longer than we anticipated for the first parts. We do not expect as we move to additional parts that this will be the norm. We are working with both customers and regulatory authorities to resolve any outstanding issues and speed up transition of these processes. With the market opportunity remains intact with the same TAM numbers that we have shown you before.

This time around, we’ve also sought to illustrate the serviceable obtainable market or SOM that we that we can capture with our current capability. We see a SOM of around $3,000,000,000 in both commercial aerospace and industrials and 1,000,000,000 in defense backed by very clear investment cycles in all areas. Both Airbus and Boeing are ramping up aircraft production. Semiconductors are in the midst of an AI driven up cycle and defense spending is increasing across The U. S.

And across NATO. The commercial aerospace market remains intact. Looking deeper into commercial aerospace, we see clear commitments from both Airbus and Boeing to transition parts into production using wired DED technology. Airbus is expecting to ramp up monthly production of the single aisle a three twenty to 75 aircraft per month by 2027 and production rate of the wide body a three fifty to 12 aircraft per month in 2028. Boeing is progressing towards its goal of increasing the seven eighty eighty seven production rate to 10 aircraft per month in next year.

And then on the right hand of this chart, you see Airbus’s own global plan for replacing forged titanium parts with additive titanium manufacturing across all of its aircraft programs. This is the game changer that we have been working towards. This year has shown us that we need to broaden our customer base and demonstrate the applicability of our technology across a broader industry base. Under the direction of our new CCO, our sales teams have performed a competitive comprehensive market entry assessment prioritizing markets that have applications offering high volume, high value, short cycle opportunities ranging from space and satellites to military system maintenance, oil and gas, and longer term automotive and robotics. We see a wide range of growth opportunities to build a sales volume.

With this as a backdrop, we will revise our business plan and revenue targets and now look for revenue of $70,000,000 in 2026 anchored in firm contracts and mature commercial discussions. This will consist of a balanced mix of commercial and defense aerospace contracts and diversified industrial sales. Around two thirds of projected sales are covered by firm contracts and mature discussions. Our previous revenue ambition of $150,000,000 has shifted to 2028, reflecting delays we have seen and more cautious ramp to the opportunities in commercial aerospace. Although these numbers represent major step up from current revenue levels, it should be noted that they still represent only a fraction of our serviceable obtainable market opportunity.

Asher?

Asher Asheri, CFO, NORSP Titanium: Thank you. Thank you, Karl. As I mentioned before, the delays in the revenue ramp and the revised business plan means we need we require additional growth capital. The cash flow breakeven has shifted to early twenty twenty seven and the current cash reserves therefore are not sufficient to support us through this revised timeline. We’re planning to raise $15,000,000 in new equity in the third quarter and combined with working capital facilities, which we’ve established relationships during the 2025, we breakeven expect by early twenty twenty seven.

Are also glad to say our three largest shareholders have committed to support the capital requirement of approximately $15,000,000 I’m going to hand it back to Karl to sum up the presentation. Thank you.

Karl Johnson, CEO or President, NORSP Titanium: Thanks, Asher. So quickly summarizing. Our market opportunity remains intact. Revenues have been delayed but not lost. We have a competitive first mover advantage.

Due to extended aerospace sales cycles, we are increasing our focus on broadening our customer base and building more diversified revenue streams. We expect revenues next year of $70,000,000 anchored in firm contracts and mature commercial discussions with $150,000,000 revenue ambition shifted to 2028. As Asher mentioned, cash flow breakeven has moved to early twenty twenty seven and we were planning for an equity raise of $15,000,000 which is supported by our three largest shareholders. With that, we’re open for questions. Danielle from Capient will pose the questions for us.

Danielle, Analyst, Capient: Okay. The first question we have, you revised your 2026 revenue forecast to $70,000,000 Why are you confident in this forecast now?

Karl Johnson, CEO or President, NORSP Titanium: If I may, this forecast is based on extensive research that we’ve done in the industrial markets on the addition of four seasoned professionals in sales, on continuing operations with our current customer base. Two thirds of our forecast are anchored in, currently anchored in contracts and mature discussions with our with our customers. So so you you look at this. This is the most bottoms up sales forecast that that we have done. And while it does not meet the original intent for this year, we really believe that this is this is an achievable committed sales forecast.

Danielle, Analyst, Capient: Okay. Next question. The timing of cash flow breakeven has been delayed about twelve months. How dependent are you on Airbus and commercial aerospace?

Karl Johnson, CEO or President, NORSP Titanium: So so the the the market space that we’re looking at is a pretty even mix between industrial sales and commercial aerospace. And of the commercial aerospace we have added new customers as you can see in the chart on the screen that that will spread the the revenue streams beyond just Airbus. So we’ve we’ve taken a factored approach to Airbus revenue and and have plans for additional revenue streams in this forecast.

Danielle, Analyst, Capient: Can you comment on the size of the Airbus third production order and its criticality to 2025 and 2026 revenue?

Karl Johnson, CEO or President, NORSP Titanium: I I think all I can say about the size of the opportunity is it’s fairly large. We have not taken it at a large value. We have been cautious in our approach for 2026. And and therefore, it represents a portion of the $70,000,000, but is is is not the largest portion of the $70,000,000.

Danielle, Analyst, Capient: But just to convert just to confirm, the third Airbus order is still on track?

Karl Johnson, CEO or President, NORSP Titanium: Yes. So we we have been in discussions with the with the commercial side of Airbus. We we we believe it is imminent, but we we we have quite honestly been unable to predict the exact timing as as our our investors know. But we believe that with the forecast we have that we’ve accounted for some delays in getting the award. But we do anticipate it in the 2025.

Danielle, Analyst, Capient: Okay. Is the forecast of $70,000,000 in revenue next year based on your expected reported revenue or is this a forecast of baseline ARR?

Karl Johnson, CEO or President, NORSP Titanium: So so we’re it’s a combination of multiple revenue streams including industrial which is more transactional and the commercial which is stickier in in longer term. The transactional activity in industrial, it doesn’t make sense to use ARR as as a metric. So we’re we’re not giving guidance on ARR. We’re looking at our revenue target as as the metric that we’re trying to achieve in 2026.

Asher Asheri, CFO, NORSP Titanium: Yeah. So so that $70,000,000 revenue target for 2026, that is revenue recognition target.

Danielle, Analyst, Capient: Okay. Can you give an indicative level of your current net operating loss carryforwards? In the event the company began to show profitability, what proportion of these net operating loss carry forwards would then be recognized as deferred tax assets?

Asher Asheri, CFO, NORSP Titanium: Yeah. So we do carry a significant amount of tax loss carry forwards both in The U. S. And in Norway. And I don’t have the exact number off the top of my head and I can report that, but those do convert into deferred tax assets, and we do in our forecasting we do take credit for those tax loss carry forwards and project that into our cash flows as well.

Okay.

Danielle, Analyst, Capient: Caused ASML to stop ordering trays? And why do you expect these orders to resume by the end of the year?

Karl Johnson, CEO or President, NORSP Titanium: K. So so our customer, direct customer is is HITTEC. They had given us a forecast and provided orders that created an inventory within their within their shop. They are burning down that inventory and we expect that given that their demand from ASML hasn’t changed and they’re burning down their backlog that our orders will resume in the fourth quarter.

Danielle, Analyst, Capient: Okay. Are the parts in your backlog building up your revenue targets all fully qualified for RPD with remaining uncertainties mainly tied to customer contract timing and production volumes?

Karl Johnson, CEO or President, NORSP Titanium: So so as we get the purchase orders, we we can begin the the qualification of individual parts. Machine qualification and and process qualification we’ve gone through with our customers. But each each each individual part number will require some qualification level and I and we depicted that in the short cycle part qualification and transition.

Danielle, Analyst, Capient: Earlier you have said your cash flow breakeven revenue estimate is around $80,000,000. What is your current estimate of cash flow breakeven revenue?

Asher Asheri, CFO, NORSP Titanium: Yeah. So we’ve earlier said it’s between 70 and $80,000,000. That hasn’t changed even though it has shifted forward about twelve months. We don’t see that changing. The operating leverage of the company is in place today.

We are carrying the organization that we need to deliver the growth and we expect that operating expense to be absorbed by margins as we scale to 70,000,000 to $80,000,000 in revenue.

Danielle, Analyst, Capient: What is driving the delay in Airbus’ order decision? Is there anything new to report since the last presentation?

Karl Johnson, CEO or President, NORSP Titanium: No. What’s what’s what’s driving their their delay, if you will, is is their the content of these parts are more critical than some we have delivered in the past. Increasing the number of additive parts that are critical is forcing them to spend more time with the regulation authorities making sure they’re comfortable with package and the application. We have qualified all of the process, all of the parts that we are looking at. We anticipate a fairly straightforward path towards qualification.

So we the position we’re in right now is we expect that any outstanding questions that remain will be resolved in the next in the next thirty days and we’ll Airbus begin to make progress on the next procurement order.

Danielle, Analyst, Capient: Who bears the risk of titanium price fluctuations during a multiyear production contract? You, your customers, or your suppliers?

Karl Johnson, CEO or President, NORSP Titanium: So so for titanium plate, we have the ability to purchase from our customers in the case of Boeing and Airbus. Our wire price is fairly fixed with long term agreements for supply. The volatility of the titanium is is actually in in our pricing is is the same problem that all of the suppliers, the forging houses and others will will have. For us, I think we’re much more flexible because of our shorter lead times. We’re able to buy our titanium on different markets which is beneficial to us.

Asher Asheri, CFO, NORSP Titanium: Yeah. And I would also add in terms of long term customer contracts, there are language there that we can fluctuate pricing in the long term. When we look at industrial markets, we look at transactional or the more transactional and short cycle customers. We’re able to play with the pricing as we see the raw material pricing developing. It is important to note though that if raw material pricing is increasing, right, we’re affected by it less than what legacy process are affected by by these pricing.

They, you know, obviously they procure more of the expensive material than we have to procure in order to deliver the same. On a like for like basis we become even more attractive in that scenario.

Karl Johnson, CEO or President, NORSP Titanium: Thank you.

Danielle, Analyst, Capient: How should we expect working capital to fluctuate going forward?

Asher Asheri, CFO, NORSP Titanium: Yeah. That’s a good question. Today, when we look at working capital today, there tends to be a bit of a lead time that we are planning towards because of the impending growth in revenue. So we’re carrying a bit of inventory on our balance sheet today which is tying up our working capital. We do expect that to smoothen out as we as we scale and and the and as a percentage of sales, expect working capital to come down come down as we grow grow revenue.

So in in in the in the short term, what we see right now is probably the highest level, but as growth comes through, we will see that number being going down as a percentage of of of revenue. We are planning for that. That’s in the cash flow projections that we are presenting. We plan for that increase and decrease, and we also discuss that with our working capital credit providers they understand that position as well.

Danielle, Analyst, Capient: Is the pace of expansion into industrial and defence markets fast enough to make up for smaller than expected order from Airbus?

Karl Johnson, CEO or President, NORSP Titanium: So so again, we we’ve taken in our forecast for next year, we’ve taken Airbus at at a a factored level in terms of both quantity and the number of parts. While they’re important to us, we’re we are we are emphasizing the industrial short cycle transactional activity as as part of a broader set of revenue streams. In in the past, we have had basically two revenue streams. We’re anticipating that with the work we’re doing right now that we will have multiple revenue streams especially in the industrial area.

Danielle, Analyst, Capient: That was actually all the questions that have come through.

Asher Asheri, CFO, NORSP Titanium: Excellent.

Danielle, Analyst, Capient: Is there anything you’d like to conclude with?

Karl Johnson, CEO or President, NORSP Titanium: Yeah. I think think it’s important to recognize that the process we’ve gone through to create our forecast for next year’s $70,000,000 in revenue has been a bottoms up revenue forecast based on research that has been done for the industrial side, based on comments that we’ve had in our meetings with our with our current aerospace and defense customers, and the and the opportunity space that that we have today. We have a commitment from our sales team that this is achievable to them, and and we look forward to showing our actual performance in 2026.

Asher Asheri, CFO, NORSP Titanium: Thank you.

Karl Johnson, CEO or President, NORSP Titanium: Yeah. Thank

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